Sunday, January 20, 2008

What the Next US President Faces

The next US president will inherit a deficit that will make it nearly impossible to enact any new policies and a war that will make it nearly impossible to correct the deficit. He or she will probably also walk into a recession that will require enlightened economic management.

Seven years of spectacular mismanagement have left such a pile of deferred problems and crises that most of the new president's time will be spent digging out from under and cleaning up the messes. And many of the problems depend on each other. As one example: the current world financial system, unofficially called Bretton Woods II, is based on emerging economies keeping their exchange rates low to support exports to the US. US consumers now represent 35% of world GDP. The system was unsustainable from the start, and as the US currency collapses it threatens all involved - perhaps most of all the vulnerable Chinese economy, which doesn't have the domestic demand to support its production. We need to create a new economic order and it's not going to be easy. The defacto dollar standard and even US position as world superpower is at stake.

In a recession, economic issues are social issues. When the economy suffers, the poor suffer most of all, and layoffs create more and more of the poor. Much as I support an enhanced social safety net and income redistribution, in a recession the size of the pie is more important than the shape of the slices.

Similarly, solving the US health care dilemma is about a lot more than assuring universal coverage. Health care costs are so out of control in the US that the US government spends more per capita on health care than Canada does, and still leaves out tens of millions of people. Health care costs have created a crisis in Medicare as boomers retire.

On top of all that, there's a brewing crisis in the middle east; an environmental crisis; US financial market regulations that require a vast overhaul; an immigration problem; and, oh yes, the probability of new terrorist attacks. No doubt I've left out dozens of vital issues.

Given this, what we need in the next president is someone with good values - social justice, economic prosperity, rule of law, environmental improvement - but whose emphasis is on good management and getting things done. To my mind, the best candidate is Hillary Clinton - but I respect Barack Obama as a choice as well.